The Role of Preferences in Disagreements over Scientific Hypothesis: An Empirical Inquiry into Environmental and Economic Decision Making

The Porter hypothesis suggests that environmental regulations, such as restricting firms to reduce pollution, stimulates innovations and create a win-win situation for the environment and for firms. It has received a great deal of attention from academics as well as bureaucrats who disagree about the applicability of the Porter hypothesis. This study tests if part of such disagreement can be explained by a preference-expectation relationship and if people are more likely to believe in a scientific hypothesis that appeals to their preferences. The results show that individuals’ who care more about the environment are more likely to believe in the Porter hypothesis. We also discuss the capacity of economic methodology to mitigate a preference-expectation bias and how it relates to the current practice in environmental economics.